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China 11, America 7, U.s. 4, Us 3, United States 3, Aarp 2, Unitedhealthcare Insurance Company 2, Germany 2, John 2, Europe 2, Hahahaha 1, Tempur-pedic 1, Cliff 1, John Dogget 1, Kristin 1, Jimmy Carter 1, Petter 1, Peter 1, Simmons 1, Sealy 1,
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  CNN    Your Bottom Line    News/Business.  
   Financial advice. New.  

    September 29, 2012
    6:30 - 7:00am PDT  

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>> reporter: too few families are saving enough for college and living paycheck to paycheck. the good news, your house price stopped tanking. hitting a bottom doesn't insure a vigorous recovery. if you're lucky, your house stopped losing you money, where are you making money? if you bought stocks 10 years ago, you're just breaking even. and savers, you know how much they're earning in interest? nothing. big companies closed and moved their companies for research and development overseas. >> chinese. >> . >> reporter: america doesn't have to make them. 70% of jobs created in the recovery are low wage jobs, 7 bucks an hour or less. >> the middle class has become poorer and less secure. john, what happened to the american middle class and how do we fix it? >> what happened in the past,
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everybody thought the solution was a higher degree of education and went from high school to diploma and college degree and eventually graduate degree. that doesn't work anymore because the nature of work is changing. the way we fix it is to understand we have to not only invent things in the united states, we have to figure out how to make them in the united states. >> we're not really doing that. author of "death by china," peter, you call this a triple zero economy. the past ten years, zero jobs growth, zero wage growth, zero stock returns. which part of that equation is the most crippling? >> i think all of them. if you think about the middle class, where they need jobs, they need wage growth. we've seen average meaning household income actually go nowhere and importantly in their 401(k)s have become 201 ks, they need robust stock returns. if we're going to get wage growth and jobs growth clearly
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we have to do, as the guest said, we have to restore the manufacturing base. one good news i have in this triple zero economy, i think going forward the next decade for stock returns will be a lot better than the last decade. the reason is simple and somewhat troubling. first of all, if you think about the stock market here in america, it's physically located here but increasingly, its returns are located elsewhere. >> sorry to interrupt you. the very thing that's been a trend many would say hurtful for american workers is the thing that can help american investors because these are companies that don't necessarily need american workers. >> yeah. that's exactly right. it is troubling in one sense but it is good news. it used to always matter whether the american economy was growing robustly. we settled from a 3 1/2% rate to 1 1/2% rate. companies are adjusting.
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companies are right-sizing and facing an era now they don't have to pay wage increases they've got historically low interest rates and selling into foreign markets rather than american markets. maybe at least one zero in the triple zero economy is going to get better. the other two zeros, of course, is why we're having a presidential election. both of these candidates need to get our manufacturing base back. we know where it's gone. it's gone to china. >> i will bring john dogget back in. what we heard so long, we didn't need to make stuff in america. i even heard you call companies that applize, make it her-- inv here, make it some place else. where are those high paid service sector jobs supposed to replace manufacturing. for 25 years i heard people say, don't worry about it. the service sector will take care of it. >> that's wrong. it's clear that the high paid
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service sector jobs are not going to come into existence because they don't make any sense. you don't need a high paid job to empty somebody's bedpan or put a catheter on them. or flip burgers. we have to bring manufacturing jobs back to the u.s. but requires a higher level of skill. in the past in our parents' generation, have a high school diploma and work overtime at ford and make over $100,000 a year. this is really important, you think about am, everything that has apple on it is made in china. if they brought that manufacturing back to the united states, that would increase the cost of an apple product by 5%. guess what? the consumers would pay that price. we can bring manufacturing back. what we're starting to see now, american companies are starting to bring manufacturing back. here's the big catch, the manufacturing they're bringing back require people with higher skills. they have to be technically
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competent, literate and work ethic very different than it used to take to work in a car plant in the past. let's bring terry savage back in with us a personal finance columnist with the "times." she's been listening. the middle class faces not only this job crunch, the student loan debtnd the average american middle class family making 75,000 dollars a year, going off the fiscal cliff will raise your taxes $2200 next year and $100 billion cut to medicare and employment benefits and things people use. will the middle classbe the biggest loser if we go off the fiscal cliff? >> america will be the biggest loser if we go off that cliff. i hope, as does everybody else, after this political season gets out of the way, the lame duck congress will come to some kind of agreement and conclusion to prevent that. all this lamenting and crying
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over the loss of the middle class in america. we have to put that in context. the definition of what middle class america means has changed over the last 20th century, farmers who moved into industrial jobs. we don't lament the guys that stood in front of blast furnaces we saw in our old high school videos making steel. technology and growth changed things. we live in a global economy. we can't change that. the best thing we can do to bring middle class america back is have economic growth. we won't have that until we have some kind of political leadership. i'm particularly talking about congress to set tax policies and get us out of this constant deficit. >> that's a very good point, why we brought up the fiscal cliff, quite frankly, you're seeing these little signs of life in the housing market, this fiscal cliff comes from elected officials. don't go away, we will talk about the middle class itself and why your trip to the mall this weekend may be subsidizing
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60% of the jobs that disappeared in the 2008 financial crisis were earners in the middle. construction, manufacturing, office management, middle wage jobs, since then, low wage jobs are the jobs coming back. 58% of all job growth in the recovery have been jobs you couldn't buy a house with or send a kid to college on. those sorts of jobs. the most amazing american consumer story in the world, apple products, made in a place called foxconn in china and it was shut down this week because of riots and personal issues there. china desperate to grow a middle class like ours and doing it ironically by feeding our middle class with gadgets we think we can't live without. is that a symbiotic relationship good for both countries? >> it's a parasitic relationship not just bad for china and the u.s. but europe and the rest of the world. what we have right now is parasitic china with its unfair trade practices drained the
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lifeblood out of europe and the u.s. as an export led economy, it's going down the tubes. guess what? it drags all the commodity nations down with it, australia, canada, brazil and russia. what we need to recognize. i heard terry talking about steel manufacturing as being old school and things like that. germany has 25% of their labor force in manufacturing compared to only 9%. manufacturing today means high technology manufacturing, which we need to be doing. if the middle class is going to survive, john is absolutely right, we need more of stem education, science, engineering, math, technology. there is a clear path to solving this problem. it basically must recognize we have to start producing as much or more than we consume. this whole thing about going to the walmart, yeah, it's cheap there but we have to understand the consequences. >> let me ask you about this.
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consumer confidence is up, a n cnnorc poll asks how the economy will be a year from now. two-thirds think it will be in better shape. that american optimism is critical but we can't fall into the traps by buying cheap stuff we don't need, it's all imported. >> nobody says it's not needed. imagine living without your iphone. >> a pair of tennis shoes. >> i agree with the point our new growth and prosperity will be made out of technology and we need education. we can't do that by bashing china. i tell you why. they are the largest foreign holder of our now $16 trillion national debt. they own over $1 trillion of u.s. treasuries. they lend to us. we buy stuff, they get dollars and then they invest back into our treasury bills, close to a trillion and a half dollars.
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>> guess what. it's not china bashing if it's true. >> it's 1$1.5 trillion. not a trillion. she's absolutely right. we need to understand chinese are not doing anything evil, they're doing what we've asked them to do. our chamming llenge is very sim >> if -- >> guess what, we told them, you want to make this stuff? sure. we'll make it. our challenge is to get the american consumers to understand there is a price to cheap. if you want to reinvigorate the middle class, you need to pay a little bit more to bring manufacturing jobs back to the united states. >> i disagree. >> let me talk about this one thing. >> all right. >> our biggest challenge is that we are declaring war against our children. we have kids at all the universities who just started, born in 1994, born in '94, and we are now have children who graduated from college who have more than $1 trillion of debt. what does that mean to the
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economy and the middle class? they can't afford to get married because they have to pay their college loans back, they can't afford to buy a house or rent an apartment because they have to pay their college loans back. what they are doing by trying to figure out how to pay their college loans back, that has had a big depressing impact on the economy and middle class. one of the things we have to do is come up with a policy that makes it possible for our kids to be competitive in the 21st century without bankrupting them with so much debt. >> i see debt, no loan policies. >> you don't want to ask americans toay more for goods. that's like when jimmy carter said turn down your thermostat. what we really need is economic growth so americans can pay more and have more money to pay for cheap goods and have the -- >> terry, we can't -- >> it doesn't work that way. >> hang on, terry, can i say something, kristin. >> jump in. >> terry, look, look.
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you can't basically go on the way we're going. if we allow china to- >> agreed. >> to legally subsidize these goods and flood our big box retailers with these cheap chinese goods we're never going to be able to restore our manufacturing base because our people can't compete with that. you have to understand, terry, there's these huge huge hidden costs for those cheap products. of course, we can ask the american people to stop buying made in china because if they do that, it will save their jobs, they'll buy less -- more safe products made here in america and elsewhere and we'll be able to restore our manufacturing base. you seem so wato want them to g keep spending on their credit card and that's what got the middle class in trouble. >> don't do that. i do not endorse -- >> i know terry does not endorse prolific spending. >> spend away. >> let me suggest.
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>> team, team, let me suggest something about manufacturing. there are two countries that have demonstrated you can still have manufacturing and make high quality products that are not cheap. one of them is japan, if you buy a lexus, you know it's not cheap. the other is germany, buy a mercedes or bmw is not cheap. >> your lexus is probably made here in the united states. >> you don't know the data on this. most lexuss are still made in japan. >> i lost control of my panel. so i will thank you all. petter, john, and terry savage. apparently we have hit on a very very interesting topic because we cannot put it to bed. thanks, guys, we will talk about it soon. coming up -- >> it's becoming more and more of a seller's market and less and less of a buyer's market. >> the housing recovery is real. who's making money and how not
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this housing recovery is real, but it's not time to celebrate just yet. this week we learned home prices are now back where they were from nine years before. before the market peaked and then crashed. if you bought in 2003, you're right back where you started. fewer foreclosures and distressed property sales. interest rates are at rock bottom. and the fed's latest plans promise to keep rates very, very low. here's who wins as housing recovers. people with jobs and money in the bank. this is not a recovery for everyone. millions of you have already been wiped out by foreclosure, and if you're still hanging on, well, the rest of this recovery could be slow.
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analytics firm fizer predicts that prices will bounce back on an average of 3.7% for the country per year for the next five years and the recovery will be uneven. we take a look at this map. we're showing you states in green. those prices there will rise by more than 5% per year in housz hou -- housing. a cnn money analysis shows that prices won't return to the 2006 highs until the year 2023. and some hard-hit states like california, florida, nevada, they're going to take even longer. but you know ha they say? they say that all real estate is local. here's where it's a seller's market. >> we put the house on the market the thursday before labor day, and we were under contract the following tuesday. >> this family is a sign of a recovering housing market. they bought their two-bedroom, one and a half bath row house in d.c.'s capital hill area for
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$355,000 in 2009. >> do you love live in capitol hill? >> yeah. >> now they're selling. >> we were thinking of listing around $340,000, and our realtor suggested $469, which at first i was worried about. so we went ahead and listed at that level. >> turned out to be the right thing to do. >> hungry buyers came knocking. >> maybe 30, 35 people came through total for one three-hour open house, which was pretty amazing. >> it was a lot of traffic. >> and we had probably seven or eight other scheduled appointments over a four, five-day period. people came by, saw the sign, just wanted to come and see the place. so there was a lot of people looking for houses in this area. >> the market has been great this fall. things are absolutely outstanding. open houses are very busy. there's buyers getting a lot of internet response to listings, getting a lot of calls on listings and things are moving fast. >> the latest housing headlines show improving builder confidence, rising sales and
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prices, and record low mortgage rates. >> housing is coming back to life. >> but don't break out the bubbly just yet. home prices aren't expected to return to their peak until 2023. >> there are three million loans that are in foreclosure or they're very late and likely to go into foreclosure. that's a lot of loans. 49.5 million people with mortgages. in some markets across the country, it's still a big problem. >> but for those in the market -- >> it's a fabulous time for buyers and refinancers. for the first time in six, seven years, sellers do have some leverage in the negotiations. prices are rising, and they don't have to cut their price like they did before. >> here's what buyers need. >> you're going to need good credit. you're going to need proof of income. and you're going to need some money in the form of a down payment. >> this family is looking to sell for a profit and they hope their next selling appearance is similar. >> so it's always going to be like this going forward, right? it is expected that prices in washington, d.c. will rice
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about 6.5% per year for the next five years, just slightly below the national average. up next, a lost decade for your home, investments, your job. but today, the biggest threat may be from your political leaders, congress. a roman's rant on the middle class squeeze is next. americans believe they should be in charge of their own future. how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪ 8% every 10 years.age 40, we can start losing muscle -- together for your future. wow. wow. but you can help fight muscle loss with exercise and ensure muscle health.
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to say the middle class is
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squeezed would be an understatement. more like caught in a vice. under water mortgages, stagnant. the economy, of course, hit rock bottom four years ago this week. it is recovering. but that recovery has been agonizingly slow. there is still all that debt. the middle class wracked up in the years before the collapse. there's a broken retirement savings system with millions of americans who did what they were told to do. they invested in the stock market through their 401ks and their iras only to see all their savings crushed, and now, just as housing and confidence begin to improve, your congress cranks the vice tighter. congress. the middle class faces the largest income tax increase in our lifetime. because of the fiscal cliff we're all about to fall over. the white house estimates a typical middle class family of four will see its taxes rise by
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$2,200 bucks in 2013. remember, we put them in august. think of that as we head to november. you think things are going to get better? you think we're going to avoid that fiscal cliff? what should be done to save the middle class? let's keep this conversation going online. find me on facebook and twitter. have a great weekend. from cnn world headquarters in atlanta, this is "cnn saturday morning." abortion, gun policy, the war on drugs. they're just some of the social issues shaping the presidential race. all morning, we're putting them in focus. i could see in his face that there was a lot me